Bridging FAQs

Bridging loans are used to buy or raise capital to secure a residential or commercial property. Bridging loans can be secured faster than other more traditional ways.

Bridging loan requirements vary depending on the lender but most will need a deposit or equity as collateral and may require proof of income and a credit check.

On average completion of a bridging loan is in between 2-4 weeks depending on solicitors work being carried out.

You can pay back a bridging finance loan whenever you have the money as there is no set due date. Lenders typically expect you to pay off the loan within a year. If it is a closed bridging loan then you are given a predetermined date to pay back the loan.

No, bridging loans are charged on a rolled up interest basis therefore clients are not required to make monthly payments. When repaying the loan the lender will only charge the client for the amount of time that they have had the bridging loan outstanding for, this could be on a daily or monthly basis however this is down to the lender discretion.

Interest is usually rolled up on bridging loans but there is also an option to service this monthly subject to affordability. The interest is typically calculated daily with most lenders but some do calculate it monthly. This means when you repay the loan you will only pay interest for the amount of time you have had the loan for.

Bridging loans often include no monthly interest payments, this means no proof of income is usually required by the lender unless you are repaying the loan through refinancing. However please note that company compliance will require a proof of income just for our files.

Lender application fees – usually 2% of the loan amount required and this is added to the loan.

Valuation fees – this varies from lender to lender depending on the surveyor used. Some lenders do offer desktop valuations which are free of charge but subject to criteria. The valuation carried out will be for mortgage purposes only.

Legal fees – this will be to cover the lenders solicitor costs; you may still need to instruct your own solicitor which will be an additional cost. Some lenders offer dual representation where the lenders solicitors’ act for both the lender and the client.

Redemption charges – although lenders do not have any early repayment charges, some do charge a redemption fee which is payable on full redemption of the loan. This can be between £100 to £300 depending on the lender.

A poor credit score may lead to lenders viewing you as a high-risk borrower which may lead to them being less inclined to approve your loan. Lenders may find this reason enough to reject your bridging while others may still supply the funding.

If you have a problem repaying your bridging finance loan your credit score can be affected. This may make getting a mortgage in the future more difficult. It’s therefore essential to receive advice on bridging loans before taking this type of short-term financing.

Bridging loans are short-term finance whereas a mortgage is long-term finance and requires monthly payments.

If you are looking to get a mortgage on the same security that you raise bridging finance on then this might make your mortgage application more difficult to obtain, due to lenders classing this as debt consolidation rather than just refinancing the property.